UK Budget Special: What Will It Cost You?

Summary

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Merryn Talks Money – UK Budget Special: What Will It Cost You?

Podcast Host: Merryn Somerset Webb (Bloomberg)
Date: November 27, 2025

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Episode Overview

This post-Budget live special of Merryn Talks Money brings together a distinguished panel — Stephanie Flanders (Bloomberg’s Head of Government & Economics), Helen Thomas (CEO, BlondeMoney), and John Stepek (Money Distilled newsletter) — to dissect the UK government’s latest Budget. The discussion goes beyond headlines to explore market reactions, fiscal risks, who wins and loses, and what the future holds for savers, taxpayers, and the British economy. Audience questions highlight real-world concerns, while the panel offers a candid, sometimes critical, exploration of policy, politics, and practical outcomes.

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Key Discussion Points & Insights

1. Market Reaction and Political Calculation

• Markets' Reaction: The panel broadly agrees that markets offered a muted response to the Budget, largely giving Chancellor Rachel Reeves the “benefit of the doubt” thanks to a more dovish outlook from the US Fed and some deft debt management (see cancellation of long-dated gilt issuances).

  • Helen Thomas: “The market [is] giving her the benefit of the doubt because... the market now seeing potentially more rate cuts out of the US is sort of in a slightly more benign mood.” (04:02)
  • John Stepek: “People get a little bit too excited about the gilts market these days because of what happened with Liz Truss... What has happened now is the gilts market is much more stable. Also the debt management office is managing the issuance much more.” (05:10)

• Political Calculations vs. Fiscal Reality: A core theme is the backloading of fiscal consolidation — “the pain” delayed until after the next election, with heavy reliance on financial markets staying cooperative.

  • Helen Thomas: “Borrowing is higher and the fiscal consolidation comes later... a pretty toxic mix if anyone thinks they’re going to do fiscal consolidation in the year before a scheduled election.” (04:39)

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2. Inflation, Minimum Wage, and Cost of Living

• Inflationary Risks: The Budget introduces some inflationary measures, notably a significant rise in the minimum wage.

  • John Stepek: “Putting the minimum wage up by 4.1% is... an inflationary measure... The Bank of England itself said... one of the reasons food prices have gone up isn't because global food prices are higher. It's because the kind of labor costs are having to get passed on by the supermarkets, which are extremely low margin businesses.” (06:31)

• Implications for Young People: Fiscal drag (i.e., freezing income tax thresholds while wages rise) is highlighted as especially punishing for young and high-earning individuals, particularly alongside new rules on student loans.

  • Merryn Somerset Webb: “You will see increasingly young people hitting this level where their marginal rate of income tax is 51% really remarkably early. And this seems to me to be one of the not particularly discussed problems in this budget.” (18:42)

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3. Lost Opportunities and Lack of Reform

• A Tepid, Cautious Budget: Panelists are clear that the Budget misses numerous opportunities for bold reform or signals of seriousness on public finances.

  • Stephanie Flanders: “It’s hard to find things good to say... you certainly haven’t seen a step change in the quality of macro decision making or a government taking advantage of the fact that it had a full term ahead and a large majority. They could have... done some front loaded fiscal consolidation... It could have been 20 [basis points off gilt yields].” (07:40-09:40)

• Signals to Investors: No significant pro-investment tax changes; the small stamp duty changes on IPOs are dubbed “very limp.”

  • John Stepek: “If you IPO, there’s no stamp duty on trading the shares for three years... the reason people don’t IPO in the UK is because they’re not going to get a good enough price.” (16:47)

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4. Welfare and Taxation: Perpetuating Imbalances

• Welfare vs. Income Tax: The panel laments the near-parity between the welfare bill and income tax receipts, a signal that is seen as harmful for young, working taxpayers.

  • Merryn Somerset Webb: “The total welfare bill is remarkably similar to the total income tax bill... pretty much every pound I pay in income tax is going one way or another into the welfare bill. And that's a terrible signal to send to our young people.” (11:11)

• Reforms That Didn't Happen: The audience and panel press for stronger welfare reform and bemoan the lack of progress.

  • Helen Thomas: “This tussle over welfare turned into a totemic debate about the two child benefit cap, and now it’s rolled into shirkers versus strivers, which is surely not what the government wanted.” (13:10)

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5. Hidden Positives and Quiet Progress

• Infrastructure and Planning: The government is praised for behind-the-scenes action to unlock infrastructure and housing developments (reducing barriers for nuclear projects, amending planning laws).

  • Stephanie Flanders: “What’s ironic about this government is all the good stuff they’re doing is the stuff they’re really trying to hide… there has been quite a lot of active involvement... to make it easier to do big infrastructure.” (14:43)

• Long-Needed Moves: The (eventual) shift of green levies from electricity bills to general taxation is noted as an overdue improvement. (16:15)

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6. Controversies and Open Questions

• Mansion Tax Practicalities: Divided views on whether a proposed mansion tax will ever actually be implemented, citing logistical and political hurdles.

  • Helen Thomas: “I would think it’s broadly extremely popular with Labour MPs... So actually that I would put on the could get passed absolutely easily.” (25:37)
  • John Stepek: “The problem is the logistics are quite serious... and the tax itself reduces the value of the house.” (26:06)

• ISA & Savings Policy: Critique over the half-hearted reform to ISAs (capping cash allocation except for over-65s), with widespread agreement that the measure is over complicated and undermined by special-interest lobbying.

  • John Stepek: “Rather than being able to stick it all in cash, you’ll only be able to stick 12,000 in cash unless you’re an old person... It’s almost like they can’t do anything without just adding a little clock.” (28:36)

• Salary Sacrifice Reform: The deferral until 2029 is seen as a sign of policy ducking and acknowledgement of its complexity.

  • John Stepek: “I find most interesting is the fact it’s not coming in until April 2029... by even just by signaling she’s going to do it, everyone who was using it is going to have to go back and have a chat with her employer.” (31:37)

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7. Audience Q&A – Real-World Worries and Macro Perspective

Notable Questions & Responses

• Has the Budget given any reason for high-net-worth individuals to stay in the UK?

  • John Stepek: “No. Pretty straightforward. Don’t think so.” (36:08)
  • Stephanie Flanders: Notes failure to address glaring issues with inheritance tax for expats or unwind non-dom changes. (36:22)

• Are we back to the 1970s? Stagnation and leadership speculation

  • Helen Thomas: “I think, you know, history rhymes, doesn’t repeat, does it?... We are in a greatly volatile world.” (38:14)
  • Stephanie Flanders: “If you look at the dynamic in the Labour Party currently, there is something that feels a bit reminiscent of that whole period... You could imagine a leadership battle at some point.” (39:21)

• Why no housing market reform, given the speculation?

  • John Stepek: No real surprise, as “they’re not going to want to do anything that makes house prices go down… the mansion tax is obviously just a sop to the left.” (41:07)

• Why not focus on pensions and investment instead of gimmicky tax-free saving caps?

  • John Stepek: “It’s a sort to the idea that they support investment but everything that they're doing in the tax system pushes against that. The tax on savings, interest, property... We've got lots of measures, dividend taxes...” (42:53)

• One major pre-budget wish as Chancellor?

  • Panel (Helen & Merryn): “Cut welfare spending.” (46:55)
  • John Stepek: Floating idea of a land value tax, but shot down by others as unpopular. (47:07)
  • Merryn: “The full abolition of stamp duty on equity trading… not a big money thing, huge signal to the rest of the world...” (47:25)

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8. Other Memorable Moments & Quotes

• On Budget Complexity

  • John Stepek: “If we spent more time focusing on making the tax system simpler... that’s not going to happen.” (43:43)

• On Young High Earners

  • Helen Thomas: “You do a smorgasbord rather than be brave and do the big income tax rise on everybody that you then end up hitting... young people.” (19:27)

• On Incrementalism

  • Helen Thomas: “It's government by committee... sitting around a table saying, okay, we’re gonna definitely do this measure, oh no, but hang on, what about this interest? ... And that’s what’s been going on, which is why it’s been leaky torture process.” (29:58)

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Notable Quotes with Timestamps

• “Borrowing is higher and the fiscal consolidation comes later. That is a pretty toxic mix...”
  —Helen Thomas, (04:39)

• “If you don’t think fiscal drag is putting up income tax on people, and I don't know what to tell you... it is about politicians being afraid to tell people hard things.”
  —John Stepek, (17:19)

• “It’s hard to find things good to say... you certainly haven’t seen a step change in the quality of macro decision making...”
  —Stephanie Flanders, (07:40)

• “Pretty much every pound I pay in income tax is going one way or another into the welfare bill. And that's a terrible signal to send to our young people.”
  —Merryn Somerset Webb, (11:11)

• “The mansion tax is obviously just a sop to the left. It may or may not happen. The real problem is... the inability to get houses being built.”
  —John Stepek, (41:07)

• “I find most interesting is the fact it’s not coming in until April 2029.”
  —John Stepek, (31:37)

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Key Timestamps for Important Segments

• Live audience poll & intro: 03:12–03:32
• Markets’ reaction, politics, and fiscal timing: 04:01–06:49
• Welfare, tax, and impact on young people: 11:11–14:12
• Hidden positives (infrastructure, green levies): 14:43–16:36
• Mansion tax debate: 25:15–28:09
• ISAs and savings policy critique: 28:09–31:14
• Audience Q&A (migration, 1970s comparisons, high net-worth tax flight): 35:37–46:27
• What they wish the Budget had done: 46:39–47:55

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Tone & Atmosphere

The episode was candid and forthright, with the panel often sharing frustration at missed policy opportunities and a tone ranging from wry amusement to faint exasperation. Attempts at positivity were largely drowned by realism—“brave effort, Helen, brave effort.” (14:12) — but the audience engagement, and some hopeful notes on hidden infrastructure wins, provided brief glimmers.

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Summary for Listeners

This in-depth Budget post-mortem offers both market-savvy and policy-skeptical perspectives for anyone seeking to understand how the 2025 Budget will affect taxpayers, investors, and the British economy. If you want to know what the experts really think — behind the headlines and official spin — this is required listening (or reading).

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Panelists:

• Merryn Somerset Webb (host)
• Stephanie Flanders
• Helen Thomas
• John Stepek

Production: Bloomberg, Live from London

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Transcript

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[Maren Sumset]

Bloomberg Audio Studios Podcasts Radio News.

Welcome to marantalksmoney, the podcast in which people who know the markets explain the markets. I'm Maren Sumset web listeners. As some of you will know, we have made a bit of a tradition of hosting a live recording of the podcast the Morning after the Budget. So earlier today I sat down with a familiar cast of Marantalk's Money guests to talk through our reactions to the budget and to take listener questions. Joining me in Bloomberg's London headquarters was John Stepek, my co host and author of the Money Distilled newsletter, Stephanie Flanders, Bloomberg's Head of Government and Economics and Helen Thomas, CEO of Blonde Money.

Now this we are hoping is going to become a long term tradition. We did this last year, same panel. You were here last year, weren't you Stephanie?

[Stephanie Flanders]

And John feels quite samey okay.

[Maren Sumset]

The idea is that we do a live podcast here the morning after the Budget from Bloomberg headquarters here in London. So with me today, Stephanie Flanders, Head of Economics and Government at Bloomberg Head, Helen Thomas. You weren't here last year, were you?

[Helen Thomas]

I was not.

[Stephanie Flanders]

I weren't.

[Maren Sumset]

Okay, well come every year please. Founder and CEO of Blonde Money and John Stepek, senior reporter and author of the award winning, multi award winning Money Distilled newsletter. I will say, by the way, that this podcast has also won an award. So this is an award winning podcast. Right now, before I start, I just want to check the feel of the audience who is happy with the budget. Hands up.

Two hands have gone.

[Public.com Advertiser]

Three.

[Maren Sumset]

Three hands have gone up. I think we've got about 350 people in the audience who thought it was a good budget for Rachel Reeves.

More hands. Okay. Good budget for young people. No old people.

More there. Okay.

[Stephanie Flanders]

For growth.

[Maren Sumset]

Not a single hand. Not a single. That was my aim to get to the bit where not a single hand went up. Okay, so can we start, Helen, with you now, the question that a lot of people ask before this budget and after it is is this enough for Rachel Reeves to keep her job for.

[Helen Thomas]

A few more weeks.

Maybe months at best? And she can thank the Fed's John Williams for that.

[Stephanie Flanders]

Okay.

[Helen Thomas]

Because what we have had is the market giving her the benefit of the doubt because broadly the market now seeing potentially more rate cuts out of the US is sort of in a slightly more benign mood. So yes, benefit of the doubt for now, but it will unravel. It will unravel politically and we'll probably come on to that.

[Maren Sumset]

Ok, so as far as the guild market is concerned, everything's basically fine.

[Helen Thomas]

Well, for sort of the next few days and weeks.

Okay, do you want me to read out the bit of the OBR report that means it isn't?

[Maren Sumset]

No, I don't want you to read it.

[Helen Thomas]

I want you to summarise.

[Maren Sumset]

Okay.

[Helen Thomas]

Borrowing is higher and the fiscal consolidation comes later.

[Maren Sumset]

Yep.

[Helen Thomas]

That is a pretty toxic mix if anyone thinks they're going to do fiscal consolidation in the year before a scheduled election.

[Maren Sumset]

Yeah. So this is what the markets may be missing. There's a lot of spending upfront, but the consolidation itself is backloaded and we can't be absolutely sure that very many things, those things will happen and we'll come on to the mansion tax later. Which is one of the things that I suspect the audience is super interested in and which I suspect will never happen. John, from your point of view.

[John Stepek]

Yeah, I think, I mean, I agree with Helen. I do think the other issue is that possibly people, I think people get a little bit too excited about the gilts market these days because of what happened with lizatrust. And the thing that we have to remember is that when that happened, it was an extremely favorable moment in global macroeconomics. So interest rates were shooting up and on top of that, Britain had some kind of LDI leverage Inside the system. So you can think what you like about Liz Truss, but she was throwing a Molotov cocktail at a gentleman. That's the point. So what has happened now is the gilts market is much more stable. Also the debt management office is managing the issuance much more. So for example, they cancelled three scheduled 30 year GILT auctions. So that means there are fewer chunks of long term debt being issued, which means the supply is down, which is another reason that yields went down yesterday, because if you need 30 year gilts, there are few of them kicking about. So I think all of that stuff is easy to neglect because we do get obsessed with the politics and the minutiae. But equally, as Helen said, it's also because the Fed now looks as if it might cut interest rates. So there's a big chunk of things going on that make her. She's throwing a Molotov cocktail, she's throwing it at a skyscraper or a fireproof trampoline.

[Maren Sumset]

Okay. And this was a relatively non inflationary budget, particularly relatively large one.

[John Stepek]

Yes. Well, yeah, I mean, relatively speaking it still wasn't. She was pushing back against like you should sort of gaming the figures a bit over the next year by, you know, pausing the index and the train fares and things like that. But certainly putting the minimum wage up by 4.1% is not, that's an inflationary.

[Maren Sumset]

Measure for younger people.

[John Stepek]

Well, yeah, and it's also, you know, because supermarkets employ a lot of people who, I mean, to be fair, the supermarkets all pay above minimum wage. But if you're going to keep paying above minimum wage and then every time minimum wage goes up, you have to bump up your staff salaries. I mean, quite apart from the impact on kind of wage compression and, you know, damaging people's motivation to work, the point is they need to pass that cost on somehow. And the bank of England itself said, you know, earlier this year, one of the reasons food prices have gone up isn't because global food prices are higher. It's because the kind of labor costs are having to get passed on by the supermarkets, which are extremely low margin businesses, as I suspect everyone in this room probably knows. So yeah, so yeah, no, I'm not particularly impressed. But I think the reason she's got away with it is because the environment is much more forgiving.

[Maren Sumset]

Yeah. Stephanie, have any major surprises in there for you?

[Stephanie Flanders]

Well, so the surprise was actually the market reaction at some level and I think it also underscored the missed opportunity because you had a budget that was, I'm not sure, at least for the purposes of today, I'm going to be slight, I'm going to try really hard to be a bit more positive because it just feels like otherwise we're going to be beating our stick over this budget for the next hour. But it's hard, I have to say. It's hard to find things to good to say. But I think it was if you're looking at the UK and thinking is this and you would, many people were obviously in the global markets, were thinking this when the Labour government came in and were actually betting on the UK putting money into the UK on the basis that this was going to be a government that was going to be more long term, certainly more stable politically, was going to take some of these tough choices after all this chaos and instead you've had a series of budgets that, that made all the same sort of awkward short term compromises. I wouldn't say these, I mean they're obviously in the labor direction. I wouldn't say they're fundamentally worse than some of the compromises that were made in the previous government. But you certainly haven't seen a step change in the quality of macro decision making or a government taking advantage of the fact that it had a full term ahead and a large majority. And I think in this case, you know, you had in our economists, chief economist Dan Hanson had identified you have that money on the table that you could have got from persuading the markets that actually you were willing to take some pain, that you were willing to have some front loaded fiscal consolidation which also incidentally could have helped the, in a more sort of fundamental way helped the bank of England to cut rates sooner. And when I saw how little the market had reacted to this one purely with the reassurance that there was more margin for error now, but not that we won't actually be making those errors, I thought, wow, they really could have, they could have come away. We had what, 4 basis points cut in yields. It could have been 20. We could have got halfway back to the U.S. potentially on a, on a, on a day where people, as we've all said, the markets were feeling a little bit more favorable. Anyway, that gap with the US there's no sensible reason for it even if you look at the long term fundamentals, except this feeling that UK governments can no longer do difficult things, which is true, which you know, based on all available evidence seems to be true.

[Maren Sumset]

What difficult thing do you think that she could have had a go at?

[Stephanie Flanders]

I mean the obvious one, but it's funny because it's A bad sign for a government that has this many years ahead, that you're constantly going back to things they might have done a year earlier. So, you know, this time a year ago, we were saying, why did she sign up to that national insurance cut, that Jeremy Hunt, or the two successive Jeremy Hunt national insurance cuts, and why hadn't she not just said, we're going to reverse those, but we'll be back to where we were. We'll keep rates exactly where they were a year ago, but we don't think these cuts are affordable. That would have saved her £20 billion of pay. Then we got to this budget, we said, well, why hasn't she done, you know, why hasn't she been braver on saying, the world has changed, you know, and actually tackled some of the things on income tax? Same with the spring statement. We had a complete change in the global environment with Trump and the intensification in Ukraine, and yet they still miss that opportunity. So I just think, you know, the real shame is that we are constantly saying, she's missed an opportunity, she's just doing the minimum. And, you know, we're going to look back and say, wow, there's just, there's so many things that this government could have done that it's not done. And instead, as we've, as we're pointing out, the welfare bill is. Is going up and the same fiscal challenges are there.

[Maren Sumset]

Yeah, well, we were talking about this earlier, about the signals that we're sending here, and one of the sort of extraordinary things that you can look at at the moment to see that the total welfare bill is remarkably similar to the total income tax bill. And you get to a point when you're looking at maybe young people working and working very hard paying their income tax, and they can now look at it and go, wow, pretty much every pound I pay in income tax is going one way or another into the welfare bill. And that's a terrible signal to send to our young people.

[Stephanie Flanders]

And it's also, it's just a weird signal that this government, I mean, you've got a particular thing around. You know, I think it was.

Really disappointing and, you know, dereliction to not push harder on the welfare reform bill, but.

To not get anything in return for this kind of important contribution to child poverty. But you would always have said, given the downsides of that, you would always have said it had to go with some more serious reform and to end up with nothing on the other side of the ledger, I think, well, there is something.

[Maren Sumset]

The return to face. To face Appointments.

[Stephanie Flanders]

Well, and I think that is.

[Maren Sumset]

That sounds little, but actually maybe quite big.

[Stephanie Flanders]

I was. Yeah. And actually yesterday someone asked me, you know, Watson, sort of the opposite of an unexploded bomb, you know, the sort of positive things that might unexpectedly go well in the next year. And that was the one I highlighted. I think there is a possibility that that will have a much bigger effect on the rolls. But remember, you've still got a lot of people who, you know, the fixed number of people already on the rolls is what's driving up the bills.

[Maren Sumset]

Yeah, yeah, Helen, let's pick up that then. Let's go for something positive. Were there any hidden positive surprises in there for you, do you think? I have a horrible feeling the answer's going to be no, but come on.

[Helen Thomas]

Well, I want to give, I suppose, give some credit to Rachel Reeves that trying to square an impossible circle and it could have been worse. So it could have been worse.

[Maren Sumset]

That's not what I'm looking for.

[Helen Thomas]

No. Okay. Okay.

[Stephanie Flanders]

So.

[Helen Thomas]

Yes. All right, let me think about that. It's quite difficult.

Okay, John.

[John Stepek]

Well, I was hoping Helen would have an answer.

[Helen Thomas]

Yeah.

[Stephanie Flanders]

In terms of the.

[Helen Thomas]

Well, I've got to get back to this thing about welfare because the front page of the newspapers this morning, pretty much singularly all negative, but, you know, it's. What is it? You know, the shirkers, the strivers are paying for the shirkers, so we just roll on all the time. And what's this government about? What is its strategy? What is its narrative? What is its central message? Where are its priorities? And then this tussle over welfare turned into a totemic debate about the 2 child benefit cap, and now it's rolled into shirkers versus strivers, which is surely not what the government wanted it to do. So, sorry, that's negative again.

Oh, okay. Okay. Well, she has, as we started on this, given something more to the sort of labor. It's a Labour budget for Labour people. I'm a Labour person doing progressive things. She said that. I think she has sold that to some degree. So perhaps she has managed to bring a bit together the splitting parts elements of the Labour Party.

[Maren Sumset]

Brave effort, Helen, brave effort.

[John Stepek]

But.

It'S not the line fell t. That's the one thing I was thinking. There was a landfill tax, which was basically. I'm not an infrastructure guy, so I didn't pay that much attention to it, but they were going to, like, multiply it by about 10 times. That basically meant you could never build a house again in the entire country. So that was probably a good idea.

[Maren Sumset]

Slashing that would be a much better idea.

[John Stepek]

That would be a much better idea.

[Maren Sumset]

It's one of the reasons why we have dumping across the UK because it's so expensive to move stuff to a landfill.

[Stephanie Flanders]

There is. I mean, what's ironic about this government is all the good stuff they're doing is the stuff they're really trying to hide or who's not talking about very much at all. So as she did mention John Fingleton's report on the making it easier to build nuclear power stations. I mean, that is, that goes to this whole swath of things of why is it so flipping difficult to build anything in this country? And there has been quite a lot of active involvement if you look, for my sins, I was actually looking at some of the amendments in the. I can't remember what it's called now, Land Planning and Infrastructure Bill, which for some reason has still not got royal assent. But anyway, there was an intervention actually by number 10 to make that even tougher in terms of overruling local council councils on big projects. A number of things that should make it easier also to do big infrastructure and those things, you know, if it becomes not impossible to build a nuclear power station, I think that's something that, you know, future governments will benefit from. But it's an important change which, you know, let's face it, all of those, the planning, all of those things got much worse under the last 15 years. There was no concerted pressure from the Conservatives on that. So I think that kind of thing matters. Also, I know it's not very popular and many people have said it's something that might get reversed, but we were going to have to move to a way of taxing electric cars and for them to have had actually been brave enough to say, okay, this is the system and it's going to come in in a few years time. Somebody was going to have to do that and we don't want it to be another thing that governments are incredibly unbrave about that we have for the fuel levies.

[Maren Sumset]

I suppose the other positive, sticking with electricity, the other positive, you might pull out the beginning of a record of a recognition that electricity bills in the UK are too high because of the piling of green levies, on and on and on and on and on. And of course they still have to be paid. Shifting them into general taxation doesn't take away the fact they have to be paid, but it takes them off of.

[Stephanie Flanders]

Electricity and it probably should have been in general taxation yeah, it should be.

[Maren Sumset]

In general taxation in the first place, but it's a recognition that we have a problem with electricity prices. So that seems. That was a very minor positive that I can.

[John Stepek]

There was the IPO thing as well, stamp duty.

[Maren Sumset]

That just irritated me, to be honest.

[John Stepek]

I mean, it's very. It's very limp because.

[Maren Sumset]

Yeah, and this is. This is the. If you ipo, then you don't. There's no stamp duty on the trading of the shares for three years, which, you know, is fine. But the reason people don't IPO in the UK is because they're not going to get a good enough price. And this of only three years short, you capitalize that into it, you get a small uplift, possibly in your issue price, but not much. And, you know, stamp duty should go across the board, don't you think? I mean, this is, again, that you've been listening but can't take the big steps to make the proper change that is needed.

[John Stepek]

I think that is the problem. And it kind of boils down to the very first question that you asked Helen. The issue here is that this is a budget done essentially to save the Chancellor's neck, and that means she's basically doing it for a tiny audience of Labour MPs, and that makes all of the difficult things even harder. I mean, it was always daft to promise that she wasn't going to put up income tax. I don't know why people are so obsessed with the manifesto, because it's very clearly been broken. I mean, if you don't think fiscal drag is putting up income tax on people, and I don't know what to tell you, to be absolutely honest. This stuff is very lawyerly kind of like way of looking at things, but if you look at all the problems that we fundamentally have, it is about politicians being afraid to tell people hard things. And that's why they're hiding the planning stuff as well, because there's a cohort who really. The yimbys want to hear it, but the nimbys don't. They don't want to be told. And as soon as. I mean, even the Yimbys, as soon as it's actually in their backyard not.

[Stephanie Flanders]

To live near the gate.

[Maren Sumset]

Exactly.

Very, very quickly, very quickly.

[John Stepek]

I think that's the problem. And I don't know how we get beyond that, except for that. I guess the electorate has to get so sick of the kind of sclerosis and the plaque building up in the arteries of the state that eventually we get somebody who's got the voter mandate to do a total clear to get to crisis.

[Maren Sumset]

Can I ask you, Helen, about. We're talking about fiscal drag, which is such a big deal in the uk and we worry a lot. We talk a lot, John, on the podcast, we talk about the rich leaving the uk, we talk about the millionaires and the billionaires and they're all going to Milan and Luxembourg and Dubai, etc. But I'm not sure we talk enough about high income young people. And so they're seeing fiscal drag like this, so they're starting to pay higher levels of income tax very early. And then of course, we saw yesterday the thing that I was surprised by, I didn't see that coming, freezing of thresholds for student lo and the freezing of interest rates for student loans. So you will see increasingly young people hitting this level where their marginal rate of income tax is 51% really remarkably early. And this seems to me to be one of the not particularly discussed problems in this budget.

[Helen Thomas]

Well, this is the thrust of if you do a smorgasbord rather than be brave and do the big income tax rise on everybody that you then end up hitting. I mean, presumably that was done to scrimp back somewhere to get the numbers to add up in that year onwards. And so actually, you know, I think that the risk of this unraveling, I mean, we're here less than 24 hours later, is extremely high that this unravels. Don't forget that just because she made the statement doesn't mean it's all, it gets through. You have to vote on each tax measure, then there's a second reading. I mean, this, you know, the whole finance bill will go, goes through. Quite possible that if one of these becomes a totemic issue, that maybe it is something on, that maybe it is something for young people that there's a big fuss about that various MPs aren't happy with. And this is the issue politically now because of what happened on the welfare bill. Because of now this budget's moving slightly to the left that that side of the party is like got a veto. It can, it can, it can push harder. We're seeing in other countries as well, look at France, other places where there's fragmentation politically. And so yes.

It could unravel. And then we now know, what we do now know is her political capital is very low. It hasn't yet got lower as a result of what happened yesterday. But for it to go up, you'd need to see the polls shift.

[Maren Sumset]

Okay, so she's done very well, she's hung onto her position as one of the most unpopular chancellors in the history of the uk and it hasn't got much worse.

[Helen Thomas]

Yeah, yeah, that's right. But this is only going to get rid the original sin, if you like, was that we've had a government with a huge majority but no mandate for various of the things it's done and they are never getting away from that because really their real mandate was just don't be the Tories.

And then actually some of the things they're doing are actually similar to what the previous government did and then that's not going well with anyone. And so the only way you end up resolving that is they'll switch leader. That might give them a bit more romantic because that person will have some slightly different policy platform, but that still won't gather. That's not what every Labour voter voted for.

[Maren Sumset]

Yeah, sorry, Stephanie.

[Stephanie Flanders]

No, I was just going to push back a little bit on Helen. I mean, I think maybe that's the parlor game that we should be playing is what, you know, you've identified Merrin. I think the student. The freezing of those thresholds for student loans is actually one of the worst things that was done as sort of on the sly. But I also think it's one of the least likely things that's going to get voted down because all the evidence. Talk about what the visible evidence for all the evidence for is that it's. You can really squeeze students for a very long time. Remember how long the fees stayed exactly the same and you had university sector students facing worse and worse services and there's been no pressure to change it. So I think that should be one of the ones that's most controversial.

[Maren Sumset]

You can squeeze students, but can you freeze relatively high income 32 year olds who suddenly look at their income and go 51%?

[Stephanie Flanders]

This is. Comes from having been fixed in terms of the basic rate, because as you know, we actually have. In terms of the average tax rate on average earners in the UK is much lower than certainly any other countries in Europe. We're much more reliant on the high earners. But we've just ended up with this really skewed system where people are. Rather than having the basic rate be higher for everybody, we're hitting these very high marginal thresholds.

[Maren Sumset]

Yeah. And maybe they'll leave, maybe they won't. We'll find out in a few years, won't we?

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[Maren Sumset]

Okay, so let's talk about the thing that I think everyone would like us to talk about, the mansion tax.

We're talking about things that might not make it so this is a tax that will take years to figure out, quite a long time to implement. Will be relentlessly challenged. Do any of you think that we will ever actually see a mansion tax on houses supposedly worth over £2 million?

[Helen Thomas]

I do.

[Maren Sumset]

You do?

[Helen Thomas]

From the point actually of me saying oh well this Labour MPs something may unravel. I would think it's broadly extremely popular with Labour MPs to do something on this, even if it's not very well designed, which does appear to be one of the key criticisms. So actually that I would put on the could get passed absolutely easily. Are you talking about the mechanics?

[Maren Sumset]

Is it logistically possible? Is anyone ever actually going to pay an Extra tax on their house that may or may not be worth £2 million.

[Helen Thomas]

I think so, John.

[John Stepek]

I mean, I guess the problem is the logistics are quite serious because a, you've got a guess at the valuation and the tax itself reduces the value of the house. And then on top of that, I've already had kind of press releases saying, is it worth splitting your house into two different homes? They're each worth 1 million.

[Maren Sumset]

I've already had two or three of those conversations literally yesterday alone split off.

[Stephanie Flanders]

The having got rid of the multiple dwelling tax relief. Jeremy Hunt. Everybody's put their houses back together again and now they're going to have to.

[Maren Sumset]

Split them off again. Yeah, we're moving into a new age of tax dodging.

[John Stepek]

Big granny flats, basically, I think that sort of thing.

[Maren Sumset]

Yeah, well, that'll solve the granny flat problem.

[Helen Thomas]

I think we'll have an election before then, by the way.

[Stephanie Flanders]

I do think.

[Maren Sumset]

Well, that's the question. They don't make it because there was an election before it happened, obviously.

[Stephanie Flanders]

I'm sure we all think that council tax should be reformed and that it's a completely useless tax at this point. And I guess if I was trying really hard to be somewhat sort of quixotic about this, I would say they have now, remember, we had even the first attempt, Ed Miliband's attempt to have a mansion tax was the kind of first effort. Now they've actually managed to break the first barricade in terms of saying, okay, we're going to have this higher level. You're quite right. Mehren is going to have lots of technical issues, but there is now an opening. If you say, well, okay, if we're going to revalue some of the houses, there's just the tiniest possibility that the mess that this causes, the clear need for councils to have a better basis for funding, may coincide into having some kind of cross party effort. And you know who could be the person who would do it? Be Nigel Farage, because he has 12 councils now who are all realizing that council tax is completely useless and actually they have a stake in reforming it in lots of different councils across the country. And if he's listening, I would say that would be a really good thing for him to show that they were a serious party that wanted to do serious things to help local and central.

[Maren Sumset]

Government want to do something really complicated.

[Stephanie Flanders]

I think it's really likely to happen.

[Maren Sumset]

Okay, Interesting, interesting. A positive. Almost a positive.

[Stephanie Flanders]

I'm trying to think it's likely to.

[Maren Sumset]

Happen, John, let's talk about isis.

[Stephanie Flanders]

Yes.

[Maren Sumset]

Right. So you and I have talked a lot about how we don't approve of the 20,000 pounds allowance for tax ISAs. This makes no sense. And that's too much cash to have if you're rolling it up every day.

[John Stepek]

Cash ISAs. Yeah, exactly.

[Maren Sumset]

Cash ISIS. It's too much. We're happy with stocks and shares ISIS, and I think we were hoping, or certainly I was hoping, that the cash ISA would be reduced and the element it was reduced by would be funneled into UK listed stocks. And that didn't happen.

[John Stepek]

No. So it's like still £20,000. And I noticed people get quite confused about this. So from April 2027, the ISA allowance will still be £20,000, but rather than being able to stick it all in cash, you'll only be able to stick 12,000 in cash unless you're an old person, unless you're over 65, which is the other thing that made it. I mean, it's almost like they can't do anything without just adding a little clock. And again, I mean, I wouldn't rant about it, but it comes back to the idea that you can't have any losers. And it's like, you know, why are we leaving it for the over 65s? I mean, there's people under 20 who want to be saving cash for a property deposit and they don't need that to be in shares. That's one of the few times when I would say, no, you need this soon, so you cannot stick it in something where a long risk horizon. But parking that. The only thing I will say is at least it's a signal.

It's a very. Again, it's kind of limp. It's a bit like the three year idea business. Yeah. And the other thing is people keep talking about how, oh yeah, but I can put my money in a money market fund. I said, well, that's not the point. To get to the point where, you know, there is a money market fund into which you can put cash, you need to have grappled with getting an investment platform and going into stocks and shares. Isa. So that's one thing why I would say that's not a kind of a reasonable objection to it, because we're actually just trying to get people to engage with investing, which a lot of people in this country currently doing.

[Helen Thomas]

Yeah. You know why this has happened with the sort of limp measure is it, it's government by committee, it's a group of, it's, you know, treasure civil servants, spads, others sitting around A table saying, okay, right, we're gonna definitely do this measure. Oh, no, but hang on, what about this interest? Okay, well, we'll give them a little bit of this. I know, but what about that lot? Okay, well, can we hand them back bits this way? Oh, no, hang on. That's the knock and that's what's been going on, which is why it's been leaky torture process.

[John Stepek]

Are you saying I'm being unfair by blaming Martin Lewis for that one?

[Maren Sumset]

Not blaming Martin Lewis.

[Helen Thomas]

Saint Martin.

[Maren Sumset]

It's interesting. Yeah, isn't it? Because one of the groups that pushed back were the building societies. You know, if you take away the Cash Islands, their mortgage rates will go up. So you definitely can't do that. And that's one of the reasons why we ended up with this mishmash.

[Helen Thomas]

Yeah. And you get the interest group, depending how good their lobbying is. And now I thought that was quite a smart angle to take because when you're lobbying, you then need to go for, well, what is really going to worry or upset this government? Oh, well, they're quite obsessed about mortgages, mortgage costs because. Well, because, you know, that was the story for Rachel Reeves, mind. You know, trust led to higher mortgage rates, which led to her losing her job.

[Maren Sumset]

Yeah.

[Helen Thomas]

And I don't want to lose my job, so don't do that.

[Maren Sumset]

The one thing we haven't talked about is salary sacrifice and how John isn't going to be able to buy the new bicycle he wanted.

[Stephanie Flanders]

Oh, I didn't spot that. Is it gone? Everyone said it was going to go. Did it go? I think so.

[Maren Sumset]

She didn't check.

[Stephanie Flanders]

I kind of assumed it did.

[John Stepek]

I thought it was just pension.

[Stephanie Flanders]

I'm sure that was fair.

[John Stepek]

I haven't looked at the absolute micro detail.

[Stephanie Flanders]

I thought it was just, okay, you.

[Maren Sumset]

Can have the bike up.

[Stephanie Flanders]

See?

[John Stepek]

Cannot tell. Yeah. No, the salary sacrifice thing, the thing I find most interesting is the fact it's not coming in until April 2029.

[Maren Sumset]

Yeah.

[John Stepek]

And part of that I'm wondering, as if, because by even just by signaling she's going to do it, everyone who was using it is going to have to go back and have a chat with her employer. Other employer is going to have to have a chat with her staff and explain about how this is going to affect their overall compensation. And so I'm wondering if it's one of those things that she's kind of thinking, well, this is just going to unravel itself rather than be something that we need to legislate for aggressively. I don't know, but it kind of feels like, I mean, because you're going to have to start talking about it now because it is complicated, really complicated.

[Stephanie Flanders]

I think that's for the length of time. I think they were told that it's just because employers were actually going to have to rework a lot of their contracts and all their systems for their payments. And so I think the internal approach to company pensions, all of that was going to have to change. So I think she was told, you cannot rush this.

[Maren Sumset]

You're going to have to just too hard.

[Stephanie Flanders]

But it should be said, you know, it's way more money, 10 times more money than you're going to get from the mansion tax. It's something that will just probably not.

[Maren Sumset]

And something which doesn't mean much to many people initially. They'll only find out later how much it's going to cost them.

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[Stephanie Flanders]

Co.

Questions from the Audience Given the dependence of this country or the income tax on high net worth and super high net worths, has this budget done.

[John Stepek]

Anything to deter people from who are.

[Stephanie Flanders]

Considering leaving but yet haven't from leaving in terms of capital incentives for their.

[Maren Sumset]

Investment to stay, is there any reason given by this budget to stay in the uk is the question? John, what do you.

[John Stepek]

Think? I don't think so. If you were already thinking of doing it, then there isn't anything.

You can see the writing on the wall. It's going to go left before it goes right again. For want of a better word, it's going to go big tax before it goes low tax again. And so no. Pretty straightforward. Don't think.

[Maren Sumset]

So. No head shake from.

[Stephanie Flanders]

Stephanie. I mean there have been some pressure, there have been some question marks of whether you could unpick some of the most damaging changes from the removal of the non dom. But she's obviously not listened to those. So.

[John Stepek]

No. Yes. The AI inheritance tax is the big.

[Stephanie Flanders]

Thing. Inheritance.

[John Stepek]

Tax. It's like people do not want to give 40% of their global assets to the UK government just because they stayed here for 10 years. I mean what's his name? Lakshmi Mittao. Just left and that's why. That's exactly.

[Maren Sumset]

Why. So that would be a very straightforward fix. But no, it hasn't happened. So I think that that'll be a no. That'll be a no. Can we have back here white shirt please? Thank you. I'm afraid all these questions are depressingly easy to.

[Helen Thomas]

Answer. That's.

[John Stepek]

Great. As a London parent who is trying to provide a bedroom for my three children and has just purchased a 2 million pound house to do that. They still don't have a bedroom because I've got two lodgers to pay the bills. Am I being punished for not having a vasectomy? And is there a pithy name that you can give to this tax for my situation? Is it the London family tax or the vasectomy tax or, you know, what is.

[Maren Sumset]

This?

Anyway, I've got a snappy name for the having too many children in central London and not being on welfare.

[John Stepek]

Tax. Max, I'm glad my legs are already.

[Maren Sumset]

Crossed.

Again. I'm afraid that one was depressingly easy to answer as well. And I'm sorry, Maybe you should have bought a cheaper house or moved out of London or. Personally, I would just give up your job at this point. Peter, here in front, I just.

[John Stepek]

Want to pick up on something that.

[Stephanie Flanders]

John said because this does feel awfully like 1970s to.

[John Stepek]

Me. What I'm interested in, the panel's.

[Stephanie Flanders]

View, is, is this 1974 or is it 1976 or is it 1979 where we actually get a revolt against the. The current.

[Maren Sumset]

Circumstances? Oh, interesting. Oh.

[Helen Thomas]

1976. Helen, I think what was.

[Maren Sumset]

1970? You were.

[Helen Thomas]

1979. No, well, no, I'm thinking what was the year with the two elections? 1974. Yes. Well, I mean, it's nice to do the historical parallels and actually it's good because we need to think that when everyone gets frustrated with politics, it's quite useful to know there were other times when things were very fractious for very understandable reasons.

But I think, you know, history rhymes. Doesn't repeat, does it? So the key thing now, of course, is debt to GDP at 100%. So we're still actually sitting on a knife edge here of at any minute I know she's built in more headroom. I mean, the OBR sensitivity said, I think it was a 1 percentage point move in gilt yields would clear that headroom. And last time around I think it was 0.6. So, you know, she has got more space, but we are in a greatly volatile world, as herself has admitted, and so the house of cards could fall apart politically and economically at any moment. So I think actually not quite analogous to the 70s, not least because news travels so much faster, markets move, everything move quicker. Yeah, crypto markets are open on Saturdays. Didn't have that in.

[Stephanie Flanders]

1976. There is something. I mean, certainly if you look at the dynamic in the Labour Party currently, there is something that feels a bit reminiscent of that whole period. I don't know if I'd dated whatever, but where you started to have. You could imagine a leadership battle at some point we might disagree about when it is.

That is from the sort of establishment center, sort of Callaghan type figure or Healey as it was then and the Michael Foot. You can imagine that kind of battle happening quite easily actually, given the concerns around the support for Green Party. And I did think yesterday it's quite interesting. I mean we look, you know, obviously I run economics and politics globally we're used to thinking right and left are no longer the key fractures in politics. It's much more complicated than that. And that's all true and we see that when we look at the opinion polls. But actually yesterday it opened up a very old fashioned space for the Conservative Party which actually I think Kemi did quite a good job of walking into. You know, we're suddenly back to, at least between the two main parties, a very old fashioned do you want to spend more on high tax and welfare or do you want to shrink the state? And if she, if the Conservatives kind of lean into that, that actually makes it quite difficult for reform, I.

[Maren Sumset]

Think. Yeah, thank you. Right, more questions. I think we've got one.

[Stephanie Flanders]

Here. Given the number of policies that were trailed in advance of the budget around the housing market, there were rumors about stamp duty, potential capital gains being applied to primary residents, an all new annual property tax.

Council tax bans being doubled at the higher end. And then on the big day, it was a big nothing. That was a surprise to me. I wondered if anyone else was surprised that there was very, very little that happened in the housing market, given what a big impact the housing market is having one way or another, almost everybody's.

[Maren Sumset]

Lives. Yeah.

[John Stepek]

John. I mean, I suppose that didn't surprise me. And as much as they're not going to want to do anything that kind of makes housing, makes house prices go down any more than they already are in real terms. The mansion tax is obviously just a sop to the left. It may or may not happen. I mean, the real problem is obviously the inability to get, you know, houses being built. And that is partly a function of the fact that house prices aren't going up anymore. And probably the main focus, if she wanted to help the housing market, was more on pushing back against inflation so that interest rates can come down a bit. And to be fair, one thing that did happen yesterday as a result of gilt yields going down is that you've actually seen mortgage rates tick ever so slightly lower over the last two months. And I suspect that will continue for as long as, you know, the bond market remains roughly kind of happy with what's going on. So we'll see. But yeah, no, it didn't surprise me because there's so much other stuff and I don't think she could raise a lot of money from the housing market in a way that wouldn't make the voters just.

[Maren Sumset]

Rebel. Also, a lot of the rumors were obviously nonsensical. I mean, we're never going to abolish stamp duty, for example. It was never going to happen. That was a very bizarre float. I know we'd all love it, but it's never going to worst tax in the uk, give or take. And there's a lot of competition. Right, we have another one in the front.

[John Stepek]

Here. Yeah. If I could just come back.

[Stephanie Flanders]

To John's comments about Cash ISIS and whether that's actually going to work.

I would have thought that if Rachel Reeves wants ordinary working people to invest more in stocks and shares and you mentioned that you've got to get your head around the money market sort of approach to do that, wouldn't it make more.

[John Stepek]

Sense to do that in the safest.

[Stephanie Flanders]

Long term way, which is to put.

[John Stepek]

More money in their pensions through salary.

[Stephanie Flanders]

Sacrifice and yet that seems to be cut. So I don't know if you have any insight.

[John Stepek]

Into. Those two seem to work against each other. Oh no, they do. I mean there's absolutely no doubt. It's a completely confused. It's not confused. It's basically again, it's a sort to the idea that they support investment but everything that they're doing in the tax system pushes against that.

The tax on savings, interest, property. We've basically got NI imposed on unearned income yesterday. We've got lots of measures, dividend taxes, that sort of.

[Stephanie Flanders]

Thing.

[John Stepek]

And.

The fact that pensions constantly have the rug pulled out from under them is another thing that militates against private sector pensions constantly. So I think you're absolutely right.

I think that if we spent more time focusing rather than gimmicks making the tax system simpler, but that's not going to happen because I think yesterday had something like. I'm sure Bloomberg added it up and it was like over 800 different measures, unless I'm getting that wrong. But we had a.

[Stephanie Flanders]

Chart.

[John Stepek]

88. 88, sorry, 88, wasn't it?

I need to get my glasses when I'm reading these charts. But it's just. It was more. Yeah, exactly. It was more than anyone for, you know, a very long time and they have been getting more and more complicated as we go on. And again, that's partly ducking difficult decisions, just direct.

[Stephanie Flanders]

Response. So I was just checking it and think, not that I'm a Treasury spokesman, but it's the cost of the salary sacrifice are predominantly, I mean, was going up to 8 billion and a huge chunk of that was going to not just higher rate taxpayers, but the very higher end, you know, people who are putting their bonuses in and other things they claim judged on the current thing at 74% of basic rate taxpayers will be protected by the cap because they're not saving, they're not putting more than £2,000 in. So just as a direct response.

[John Stepek]

To that, the problem with that, it comes back to this thing. People not seeming to realize that the folk who are basic rate taxpayers now aren't basic rate taxpayers for their entire lives. You know, it's like the number of people who hit 40 and hit 45 during their life cycle is much greater than the current number. And so what we're actually doing is we're punching people in the face when they get to the point where they should be at peak earnings and should also be at peak savings, because that's kind of the big issue. Everyone probably hits 40 or 50 and starts to look at their pension, assuming they're not working for the public sector and goes, oh my God, I'm going to be poor when I retire. And that's why you need that kind of thing when people are on 40 or 45%. So it's not enough for the government to turn around and say, oh yeah, but we're protecting this lot. We're getting to the stage where, I mean, the minimum wage 8 billion.

[Stephanie Flanders]

Is a lot of.

[John Stepek]

Money.

So you're saying that we couldn't.

[Stephanie Flanders]

Get a third of that, say, is going to people who are on maybe half a million. It just.

[John Stepek]

Is. Sorry, but I think that there's too much of this. Again, it's that sort of zero sum thinking as opposed to why don't we stop worrying about how this guy's got this and start thinking about why is the economy so sclerotic and piling it up with extra complexities all the.

[Stephanie Flanders]

Time. I mean, I'm partly saying devil's advocate, but in these conversations we do tend to think of tax relief spending as great spending that is somehow very different from other forms of public spending. You're deciding to spend 8 billion because you're foregoing that you could have spent it on something else. You are spending. You are deciding to spend 8 billion on people being able to do These pension savings, just remember that is exactly the same as any other.

[Maren Sumset]

Form.

Extent to which how much you should have an event and all that kind of thing. We'll come back to this, but we've got a very enthusiastic question answer at the back.

[John Stepek]

Here. Hi, good.

[Mastercard Advertiser]

Morning.

[John Stepek]

Thanks. You are now selected as our new Chancellor and you have one wish. This is pre budget. What would your one major policy.

[Helen Thomas]

Be? Ooh.

Cut welfare.

[Maren Sumset]

Spending. Yeah, yeah, exactly. That's what I was going to say. Just find a way to cut welfare.

[Helen Thomas]

Spending.

Or try and even do what she tried to do, which was reduce the rate of growth, which is what she was trying to.

[Maren Sumset]

Do. Failed on.

[John Stepek]

That. John, it is a good question. If I'm trying to think of policy, then I mean something I've always been mildly attracted to is a kind of land value tax. And if you're looking.

[Maren Sumset]

At. No, no, no, no, no, no, no. Ignore.

[Stephanie Flanders]

John. Stephanie, I think you have to, I mean the world. Well, it has to be.

[Maren Sumset]

Welfare. Although in particular, if there was outside welfare, one thing that I really would have loved to see and it wouldn't have been hardened, it would have sent a brilliant signal, would be the full abolition of stamp duty on equity trading. And we've talked about on the podcast over and over and over. It's not a big money thing, 5 billion here or there, and it's huge signal to the rest of the world that we were taking our equity market seriously. That would have been, I think, the one. And so easy, so easy, so quick, such a signal here in front. You've had your hand up a long time. Thank.

[Stephanie Flanders]

You. Given that fiscal drag seems to be a very good way of raising revenues without letting people know you're raising revenues. How long, particularly given what's happening in the States with. Do we have Kevin Hassett coming in as Fed Chair? How long until we have QE back in the.

[Maren Sumset]

Uk? Oh.

[Stephanie Flanders]

Definitely. Really long time, I think, actually. I mean, that's one of the things, that's one of the missed opportunities, right? I mean, inflation has narrowed her room for maneuver in some ways and obviously she was sort of punished a bit for doing things last year that increased inflation because then that slowed interest rate cuts. But one of the advantages we have in the current environment from the higher inflation is that the bank of England has plenty of room to cut. And if you look at the revisions that were made in the next few years, growth. One of the reasons why we haven't got into the fact that she wasn't faced with a hole to fill thanks to The Office of Budget Responsibility, because their lowering of real growth was actually largely offset by them deciding actually inflation and wages were going to be higher over the next few years and they hadn't fully factored that in in their nominal GDP, cash GDP estimates. So without getting too much into the sausage making, I think, yeah, I don't think, well, we can see in a few years time, but I don't think QE is on the.

[Maren Sumset]

Horizon. Helen. QE.

[Helen Thomas]

Coming. I think it could come back. Sorry, not QE but asset purchases could come back. If we do get to a dysfunctional point in the bond market, which I do still yet see there being a risk of purely because huge amounts of debt, as we know throughout the world, huge amounts of issuance.

Inflation, broadly speaking, is higher now than it was in the 15 year decade before. Sorry, 15 year decade, 50 year period before. And so at some stage, you know, there's going to be a serious case of indigestion and then they may well need to sort of step in with bond purchases just to stabilise things, not.

[Maren Sumset]

Qe. All right, there's a sort of maybe for you, more questions on the aisle here. That's close by. Thank.

[Stephanie Flanders]

You. Thanks. Yeah, just a quick question on unemployment. So unemployment rate's been ticking up the last two years, even a little bit before the last GE from like 4% to 5%. Given John mentioning the minimum wage going up and everyone mentioning the fiscal drag, do you think this budget is going to sustain, keep ticking up that unemployment rate or perhaps even accelerate.

[Maren Sumset]

It?

Anyone want to say anything.

[Helen Thomas]

Beyond. Yes, well, don't you think there's not been much discussion of recession, but a lot of stuff talk about recession in the us. I mean, I know we're sort of bumbling along at pretty much zero bit above it. OBR said this doesn't really change the growth outlook that much, this budget, but you know, what if there is some sort of shock? Could be external, could be here. What if on the salary sacrifice element, I think that's going to be a hit to employers. Cost for them will be going up, you know, minimum wage, as you mentioned, so. God, I know I sound really gloomy, I didn't mean to sound so gloomy. I mean, obviously we go into recession, we'll have a loads of bank of England rate cuts, so that will.

[Maren Sumset]

Help. But we have new workers rights, etc. So there's a lot going on. Of course, that doesn't necessarily move in the direction of making people think themselves, gosh, I'll go out and employ another 10 people next.

[Stephanie Flanders]

Week.

[Helen Thomas]

Exactly. Yeah. So I think it's a.

[Stephanie Flanders]

Risk. I mean, I think you've. Obviously one of the big factors that's been supporting employment has been immigration and if that. We're now on a. So that's something which is kind of offsetting some of this. But, you know, we get back to the welfare reform thing. It's not the unemployment rate that matters, it's the huge number of.

[Maren Sumset]

People. Is the inactivity rate inactive? Yeah. Okay, can someone please ask a question to which we can give an upbeat answer? Here we go in the front here.

Well, whatever the question is, we're going to have an upbeat answer. Okay, I'm not sure if this makes.

[Stephanie Flanders]

Sense. Hold.

[Maren Sumset]

On. I wrote it down because how much is fiscal drag affecting how much people spend? Especially since households have a high, like marginal. Marginal propensity to consume.

Well, I mean, any reduction in your income is going to affect how you spend.

[John Stepek]

Right? Yeah. I guess it's because it's kind of in the future that people maybe don't think about it in the same way. Because actually, going back to your point there, Henry, the point about fiscal drag, I think people are aware of it, but I do not think that they fully understand what it means in number terms. And so I don't think that people will sit there and think in 5 years time my income is going to be lower by this amount, therefore I'm not going to spend today. My own view tends to be that if people have got money in their pockets, they spend it. But I'm not an economist and I know the economists have slightly different views of expectations. I think people are a lot more short term perhaps than.

[Maren Sumset]

Economists. And also this is an interesting one because it means people need to have an understanding of how inflation works to understand how fiscal drag.

[John Stepek]

Works. And it's not visible either. It's like inflation. You go to the supermarket every week and that's why the bank of England people care about food price inflation, because when the price of food goes up, people do notice it and they will change their behaviour. Beyond that, something that's a bit longer is kind of hard to do, especially if your wages are going up as well and you can't quite work out how much more you're getting compared to how much more your life's costing you. It's a good.

[Stephanie Flanders]

Question.

Sorry, just on the comparison, because there was a lot of discussion around whether they would raise the basic rate of tax. Tax and then offset that with a reduction in the national insurance. And that would have actually been slightly better for lower income or sort of basic rate taxpayers actually people in the lower brackets and they tend to spend more. So on your point, I think this is going to have a bigger impact on spending potentially than if they'd gone that.

[Maren Sumset]

Route. My apologies to those of you who didn't get your question asked. We'll be around for a few minutes afterwards, so do ask them then. And all there is to say is thank you so much for joining us today. Hugely appreciated it and thank you to my wonderful guest.

Thanks for listening to this special post Budget episode of Marin Talks Money. If you like our show, rate, review and subscribe wherever you listen to podcasts. Also be sure to follow me and John on X or Twitter ariannasw and johnstapek. This episode was produced by Sama Saadi and Moses Andam. Special thanks of course to Stephanie Flanders, Helen Thomas, Vic Wakely and all those at Bloomberg who helped with this production. Questions and comments on this show and all our shows are always welcome. Our show email is.

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